"As for Andrew's argument, I think anyone who simply reads the Howard and King summary of Grossmann's argument will have the same difficulty I have in understanding Andrew's characterization."
Sure, Grossmann doesn't SAY the system breaks down because demand for investment goods exceeds the amount produced, and he (like H&K) probably didn't realize it. But that's exactly what his scheme IMPLIES. It is not a good idea to judge economic theories by what their authors say about them.
"> This can be rewritten as
>
> (2) C(t+1) + V(t+1) > C(t) + V(t) + S(t).
This equation is wrong. This does not have to be an inequality for there to be breakdown."
Well, G is unclear about whether breakdown means zero capitalist consumption or not enough surplus-value to expand production at the required rate even when capitalist consumption is zero. But this is trivial; if you wish, relpace the greater-than sign with a greater-than-or-equal-to sign. My proof goes through as before, except for a minor teminological change: demand for investment goods is so great that there's nothing left over for capitalists' consumption, so the system breaks down.
">
> This makes matters clear. Breakdown in Grossmann's sense
occurs
> if investment demand in value terms, C(t+1) + V(t+1), exceeds
the
> value produced in the preceding year.
No Andrew, breakdown occurs because Grossmann assumes that additional constant capital WILL BE the first item purchased out of surplus value even if there is not enough left to add variable capital at the presecribed rate...and, more importantly, even if there is thus nothing left for capitalist consumption."
Sure. This doesn't contradict what I wrote. If there's not enough surplus-value to expand V at the required rate, it follows that there's not enough surplus-value to expand C+V at the required rate.
Your whole line of argument in terms of excess capacity is irrelevant, because the analytics simply don't require that means of production be bought before workers, or vice-versa, or whatever. You yourself have defined breakdown as the point at which capitalist consumption is 0, given that C and V expand at the required rate. This can be stated as:
(1) [C(t+1) - C(t)] + [V(t+1) - V(t)] = S(t)
or
(2) C(t+1) + V(t+1) = C(t) + V(t) + S(t)
or
(3) C(t+1) + V(t+1) = W(t).
And, since C(t+1) + V(t+1) = P*K(t+1), and W(t) = P*X(t), we obtain
(4) P*K(t+1) = P*X(t)
or, equivalently
(5) K(t+1) = X(t).
Equation (5) means precisely that breakdown in your sense occurs because demand for investment goods is so great that there's nothing left over for capitalists' consumption. Clearly there will be breakdown as well if investment demand is even greater. And it should be perfectly clear that "excess capacity," i.e., purchasing the elements of C without enough purchases of the elements of V, has nothing to do with it.
"But now there is not enough surplus value to purchase all the additional means of production. In addition to the growth of the unemployed, there is excess capacity in division one now of more than 11,000 units of constant capital. That's year 36."
But please forget such unenlightening complexities. Can we agree that breakdown in Grossmann's sense occurs if, after expanding C & V at the required rate, capitalist consumption can't be positive? If so, my proof goes through.
"Even Andrew's equation does not really show that investment goods are underproduced relative to investment demand at t+1; rather it would be more accurate to say that at the breakdown point the rate of surplus value, fixed by Grossmann at 100%, was not high enough for capital to continue to meet its accumulation requirements while allowing at least stability in the capitalist consumption fund."
This is incorrect. You're suggesting raising S and thereby lowering V. But if V is lowered, so is investment demand in physical terms. So you're suggesting that breakdown can be postponed or negated by lower demand for investment goods relative to their supply!!
"The whole pt of his theory is that ..."
What is at issue, here and now, is not the point of his theory, what HE wanted to say, but what his breakdown equations THEMSELVES imply. Can we stick to this point?
I'll tell you what. You provide a numerical or algebraic example of Grossmanic breakdown that is not reducible to too much demand for investment goods, and I'll retract my claim. If not, you retract your charges of caricature and paranoia, etc. OK?
Andrew ("Drewk") Kliman Home: Dept. of Social Sciences 60 W. 76th St., #4E Pace University New York, NY 10023 Pleasantville, NY 10570 (914) 773-3951 Andrew_Kliman at msn.com
"... the *practice* of philosophy is itself *theoretical.* It is the *critique* that measures the individual existence by the essence, the particular reality by the Idea." -- K.M.